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Insolvencies soar through visa policy, UK

Stricter immigration rules for foreign students and the government’s austerity programme have caused the number of businesses going bust in the education sector to soar by 44%, according to research from a British accountancy firm.

In November 2011, 450 colleges were banned from taking on new non-EU students

One hundred and sixty nine educational institutions became insolvent in 2011, up from 117 in 2010. In comparison, corporate insolvencies as a whole rose by just 3% over the same period said accountants Wilkins Kennedy.

In November 2011, 450 colleges were also banned from taking on new non-EU students as they failed to meet the government’s new rules for inspection of the sector.

“2011 was a difficult year for the private education sector and there is likely to be further pain still to come,” said  Keith Stevens, partner at Wilkins Kennedy. “The government’s introduction of stricter immigration rules for foreign students has seen the number of foreign students fall substantially, putting many colleges and groups of colleges out of business.”

The firm said policies introduced last July had driven the trend by slashing institutions’ income. These included restrictions to part-time working hours for international students; limits on those able to register as dependents; and requiring education institutions to confirm courses are a genuine progression of a student’s academic career.

It added that many UK private institutions had become “heavily dependent” on foreign students for funding as UK higher education had grown in appeal worldwide. At the same time the US, Germany and Australia had eased their student immigration policies, diverting foreign students away from the UK.

“Overall, the UK is now a much less attractive place for foreign students. The dramatic fall in the inflow of foreign students has hit the revenue of colleges very badly,” said Stevens.

“Overall, the UK is now a much less attractive place for foreign students”

Niel Pama, former principal of the London Institute of Technology and English’s Bayswater branch experienced the consequences of the stricter visa regulations first hand. “We achieved British Council accreditation and expanded our undergraduate and graduate courses until we had a total student body of over a thousand students,” said Pama.”The UK Border Agency’s drastic immigration rule changes then came into effect and we saw our student numbers plummet.”

The research highlighted the “final tightening” of visa policy by UKBA earlier this month. Foreign students who want to work after graduation now need to earn at least £20,000 a year and work for companies that are approved by the Home Office.

There will be limits on the time that can be spent studying at degree level and restrictions on work placements. In addition, every education institution that wants to sponsor foreign students will have to be qualified as “highly trusted sponsors” and be accredited by statutory education inspection bodies by the end of 2012.

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